County Council supports KE sale, but only if mayor’s stipulations are approved

The Kaua’i County Council yesterday voted 5-2 in favor of sending a message of support to the state Public Utilities Commission regarding the sale of Kauai Electric to Kaua’i Island Utility Co-op.

But support from the council is contingent on the co-op applying for a 6-percent electric rate reduction for Kaua’i electric users five days after the deal closes.

That’s a deal breaker, said Gregg Gardiner, KIUC board chair

Such a stipulation would violate terms of the PUC’s preliminary approval of the sale, “strip KIUC of equity,” and make it impossible for KIUC to get a low-interest, federal-government loan to fund the $215 million purchase price, he said.

Final position statements are due to the PUC today from buyer KIUC, seller Citizens Communications, and the intervening parties – the County of Kauai, the state consumer advocate, and the Navy.

A decision by the PUC is expected by next Tuesday. By state law, the PUC must approve the sale before it can be finalized.

During a special meeting of the County Council that took most of the business day yesterday, including an executive session lasting most of the morning, the council agreed to send a single county position statement, brokered by Mayor Maryanne Kusaka, her Administrative Assistant Wallace Rezentes, Sr., special counsel Bill Milks, Deputy County Attorney Galen Nakamura, members of the council and other participants.

Milks explained in the public session following the executive session that the administration would favor the sale if issues of sale price, rate reduction and co-op governance were addressed.

Specifically, the administration would support the sale if:

– The 6-percent rate reduction is filed by KIUC five days after the sale closes. This would still allow KIUC to get the low-interest loan from the U.S. Department of Agriculture’s Rural Utilities Service and provide rate relief the administration desired, Milks said;

– KIUC immediately begins gathering information necessary for a rate study, depreciation study and cost-of-service study (Gardiner said those studies were to be mandated by the PUC to be conducted by KE, or KIUC if it is successful in purchasing the utility, at the time of its next rate-increase request before the PUC);

– The agreed-upon sale price of $215 million is put into something similar to an escrow account, with Citizens paid at the time of closing the appraised value or net book value of somewhere between $190 million and $202 million, with the remaining amount to be paid either to Citizens or KE based on operating results for the years 2003 to 2007;

– Governance issues are resolved by the co-op clearly spelling out board nomination, elections and qualifications processes, and making all co-op proceedings subject to the state’s sunshine law, or open-meetings law.

All involved parties understand that the county’s position statement, including the conditions, is subject to the whim of the PUC, meaning the board charged with approving or rejecting the KE sale application could implement some or all of the suggestions, or totally ignore the document, between today and next Tuesday.

A Navy spokesman said the Navy’s final position statement will be in favor of the sale. The Navy’s Pacific Missile Range Facility at Barking Sands is one of the top-ten users of electricity on the island.

The consumer advocate filed an agreement in lieu of a preliminary position statement in favor of the sale.

The county administration filed a preliminary position statement opposing the sale.

Gardiner said the fact that the county administration, one day before final position statements were due, agreed to support the sale price, RUS financing, and the stipulated agreement in lieu of preliminary position statements, is big news.

Councilmembers Bill “Kaipo” Asing and Jimmy Tokioka voted against the joint position statement, with Asing feeling the terms of the sale before the PUC now are in the best interests of the people of Kaua’i.

Those siding with the majority generally liked the idea of what Councilman Bryan Baptiste called “safety nets” to ensure lower rates for Kaua’i rate-payers, who pay among the highest rates per kilowatt hour for electricity in the country.

“I’m very pleased that, through cooperation between the administration, the council and our special counsel, the county will be able to present a unified position to the Public Utilities Commission and the parties to the sale,” said Kusaka.

“To have six of our eight elected officials agree on this position is a significant statement,” she said.

“Further, I am delighted to be able to support KIUC’s ownership of Kauai Electric, subject to these conditions. I have said all along that I am not opposed to a cooperative, and that I could and would support KIUC within certain parameters,” Kusaka said.

“My message has been consistent from day one, and I appreciate the support from members of the community who have agreed with our position, and have made their feelings known throughout this process as well,” the Mayor concluded.

Staff Writer Paul C. Curtis can be reached at mailto:pcurtis@pulitzer.net or 245-3681 (ext. 224).

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